With the advent of the Internet, manufacturers, retailers and consumers have used online auctions to buy and sell merchandise. Online auctions are available that are run both as forward auctions and as reverse auctions. In a forward auction, the sponsor of the auction is typically selling a product or service and is seeking the highest price from the various participants in the auction. More specifically, the sponsor provides details about the subject of the auction, and may delineate who may participate in the auction. The participants in the auction then submit their bids to the online auction. When the auction is complete, the subject of the auction, i.e. the product or service, is awarded to the highest bidder.
In a reverse auction, the sponsor of the auction is typically seeking to purchase a product or service and is seeking the lowest price from the various participants in the auction. The sponsor provides details about what the sponsor is seeking to purchase, and may also delineate who may participate in the auction. The participants in the auction submit bids to the online auction. In contrast to the forward auction, when the auction is complete, the subject of the auction is awarded to the lowest bidder.
Using the Internet to conduct the auction has made the process more efficient. Specifically, it is unnecessary for the sponsor of the auction and the participants in the auction to be at the same location to conduct the auction. Rather, the sponsor and the participants may participate in the auction from any location and access the auction from their location with a computer connected to the Internet.
There are some limitations, however, to an online auction. Currently, sponsors of an auction are limited to electronically evaluating participants based on price and quantity. Additional qualitative (e.g. quality, past performance) and quantitative (e.g. delivery time, location) measures are examined outside of the system. To clarify, current auction systems do not allow sponsors to compare participants on an “all factors being equal” basis. Some participants will excel in quality, but demand a premium on products. Current applications do not account for this type of factor.